"Much have I seen and known; cities of men
And manners, climates, councils, governments,
...the fortune of us that are the moon's men doth ebb and flow like the sea, being govern'd, as the sea is, by the moon" [Henry IV, I.ii.31-33]
HISTORY NEVER REPEATS ITSELF, BUT IT OFTEN RHYMES
"There is a Providence that protects idiots, drunkards, children and the United States of America." Otto von Bismarck

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Tuesday, September 30, 2008

Carter/Clinton began the Avalanche

Terry Jones sums up how Clinton conspired to inflate Fannie-Freddie into a Ponzi Scheme and brought down the entire Wall Street superstructure balanced on bad loans. Here's how Carter started the process and Clinton piled up enough to begin the makings of a cascade:

While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own homes." He meant it.Clinton saw homeownership as a way to open the door for blacks and other minorities to enter the middle class.Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin's Treasury Department to rewrite the rules in 1995.The rewrite, as City Journal noted back in 2000, "made getting a satisfactory CRA rating harder." Banks were given strict new numerical quotas and measures for the level of "diversity" in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another.Loans started being made on the basis of race, and often little else."Bank examiners would use federal home-loan data, broken down by neighborhood, income group and race, to rate banks on performance," wrote Howard Husock, a scholar at the Manhattan Institute.But those rules weren't enough.Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous.Clinton's HUD secretary, Andrew Cuomo, "made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis," the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way.Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks.Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises boomed.With incentives in place, banks poured billions of dollars of loans into poor communities, often "no doc" and "no income" loans that required no money down and no verification of income.By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market — a staggering exposure.Worse still was the cronyism.Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2-to-1 dominance of Democrats over Republicans.Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars filled by Fannie and Freddie.Over that time, the two GSEs spent $200 million on lobbying and political activities. Their charitable foundations dropped millions more on think tanks and radical community groups.Did it work? Well, if measured by the goal of putting more poor people into homes, the answer would have to be yes.From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners.The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast.Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the Clinton era.

And then Fannie-Freddie got looted by the likes of Raines [$90 million], serial criminal Gorelick[$75 million] and Jim Johnson[tens of millions].

And of course, BDS requires that it was all GWB's fault, as brain-dead Pelosi said just before the vote!.

Sadly, the solidly Dem core constituency is too stupid or sunk in utter corruption to be influenced---a self-inflicted penal colony.

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About Me

"''I have drunk ale from the Country of the Young And weep because I know all things now: I have been a hazel-tree, and they hung The Pilot Star and the Crooked Plough
Among my leaves in times out of mind....' Much have I seen and known; cities of men
And manners, climates, councils, governments...the fortune of us that are the moon's men doth ebb and flow like the sea, being govern'd, as the sea is, by the moon."
Twenty-and-eight the phases of the moon, The full and the moon’s dark and all the crescents, Twenty-and-eight, and yet but six-and-twenty The cradles that a man must needs be rocked in: For there’s no human life at the full or the dark. From the first crescent to the half, the dream But summons to adventure and the man Is always happy like a bird or a beast; But while the moon is rounding towards the full He follows whatever whim’s most difficult...An aged man is but a paltry thing,A tattered coat upon a stick, unless
Soul clap its hands and sing, and louder sing
For every tatter in its mortal dress....Consume my heart away; sick with desire
And fastened to a dying animal
It knows not what it is; and gather me
Into the artifice of eternity.